Texas Court May Rethink HMO ERISA Preemption

September 30, 2002 (PLANSPONSOR.com) - A federal
court appeals panel wants a reexamination of a law that has
been used by health maintenance organizations to block
patients' suits in the Lone Star State.

On September 17, a panel of the 5th U.S. Circuit Court
of Appeals upheld a decision by U.S. District Judge Sidney
Fitzwater of Dallas that the Employee Retirement Income
Security Act of 1974 (ERISA) pre-empted a patient suit,
according to the Texas Lawyer.

That suit was filed on behalf of a woman whose left leg
had to be amputated because her HMO allegedly delayed and
denied special treatments ordered by her doctor after she
underwent skin graft operations and surgeries to create
flaps over wounds caused by a spider, according to the
report.

Gwen Roark died in November 2001 from injuries that were
the basis of her suit, says George Parker Young, who
represents Roark’s husband, Robert, and her estate.

Clean Slate

Judge Jerry Smith, writing for the panel in Roark v.
Humana Inc., said the Roarks would have a strong case
against ERISA pre-emption if the panel was “writing on a
clean slate” or the 5th Circuit was deciding the case en
banc in light of US Supreme Court decisions in recent
years. However, Smith, who was joined in the opinion by
Judges Fortunato Benavides and Robert M. Parker, said the
panel was bound by the 1992 decision of a separate panel in
Corcoran v. United Healthcare Inc.

George Parker Young, who is representing Roark’s husband
Robert and her estate in the suit, says he will file for en
banc consideration of Roark by the 5th Circuit.

In the suit, Robert Roark alleges violations under the
Texas Health Care Liability Act, passed by the state
Legislature in 1997. The THCLA was the first statute in any
state that allows patients to sue HMOs for liability in
medical-malpractice cases.

Previous Findings

In the Corcoran case, the Fifth Circuit held that an HMO
makes benefit determinations as part of its mandate to
decide what benefits are available under the ERISA plan.
Such so-called “mixed” eligibility determinations are
pre-empted by ERISA, according to the court.
However, it acknowledged in the opinion that its ruling
would leave some patients with no remedy for potentially
serious mistakes.

In 1995, the US Supreme Court said in New York State
Conference of Blue Cross and Blue Shield v. Travelers
Insurance that a state statute’s indirect economic
influence doesn’t bind HMO plan administrators to any
particular choice and doesn’t run afoul of ERISA
pre-emption. In 1997’s California Division of Labor
Standards Enforcement v. Dillingham Construction, the high
court held that a state law addressing wages in
apprenticeship programs in state-approved and
nonstate-approved programs was indifferent to ERISA
coverage (see
Letter of the Law: Dillingham decision moderates ERISA’s
sway over state law
).

More recently, the US Supreme Court, in a divided five
to four vote in Rush Prudential HMO v. Moran, rejected the
notion that ERISA preempts independent review of a health
maintenance organization’s decision that denies health
coverage (see
US High Court Green Lights State HMO Review
). Such reviews are now in effect in about 40 states.